Leasing Operator Carlyle Seeks $700M from Insurers, Reinsurers Over Jet Seizures

Carlyle Aviation seeks $700 million from insurers, which include AIG, Axis, and Chubb, after failing to pay out on jet seizures by Russian airlines.

Source: Financial Times | Published on November 2, 2022

Aviation insurance market

Carlyle Aviation Partners, one of the world’s largest plane leasing companies, is seeking $700 million from more than 30 insurers and reinsurers after failing to pay out on jet seizures by Russian airlines.

The motion, filed late Monday in Florida, claims that the insurers, which include AIG, Axis, and Chubb of the United States, acted in bad faith on insurance policies covering 23 planes following the Ukraine conflict.

This claim may allow a jury to award Carlyle punitive damages in excess of the $700 million sought by the company, according to a person familiar with the case.

Carlyle Aviation Partners, a subsidiary of the Carlyle Group, is one of many lessors attempting to reclaim plane leased to Russian airlines earlier than Russia’s assault on Ukraine on February 24.

Russian carriers, acting on official orders, have taken control of approximately 500 planes worth $10 billion leased from foreign firms. They have ignored lessors’ requests to return the planes.

The case was brought by Carlyle Aviation’s UK and US arms, dubbed “the Carlyle plaintiffs” by the authorized declaration. It claimed that the insurers committed nine separate breaches of contract.

“Defendants have failed to provide coverage for these losses in blatant breach of their contractual obligations, and months after the Carlyle plaintiffs first notified defendants of their covered losses,” the authorized motion stated.

Although the motion stated that the insurers had given no reason for their failure to pay out, insurers in other circumstances have insisted that the planes, which are sometimes still in use in Russia, have not been lost.

There have also been questions raised in different instances about whether or not claims should be made under the insured firms’ war-risk insurance or different insurance policies.

According to Carlyle’s filing, the insurers “violated their good faith duties” by failing to evaluate the company’s claims in a timely or critical manner.

“Despite the claims being presented in March 2022, and despite full particulars of the claims having been provided months before the filing of this complaint,” the papers stated.

The claim alleged that the insurers had also systematically denied or delayed evaluation of insurance claims filed by other claimants in a situation similar to Carlyle.

According to the court filing, the Carlyle case involves 16 Boeing and 7 Airbus plane leased to 12 different airlines. The largest single group of planes consists of five Boeing planes leased to Utair, a regional airline based primarily in western Siberia.

The majority of the planes are in Russia, but one Boeing plane operated by Azur Airlines is being held in Egypt.

According to the official papers, the Egyptian authorities have been uncooperative, despite the fact that the Egyptians recently indicated they would launch the plane if Carlyle paid airport storage fees.

None of the insurers were willing to comment.

Carlyle Aviation Partners stated it was filing the lawsuit because it had “exhausted all avenues” for recovering the plane and had not been compensated in accordance with its insurance coverage policy.

“We have fulfilled all obligations under the insurance policy, which was designed specifically for this type of risk in this situation,” the corporation stated.